Economic Report of the President

quarters before the trough, dropped sharply until the trough, and mostly grewthereafter. The most recent recession stands out as different in that consumptioncontinued to grow throughout. This likely reflects the important role offiscal and monetary stimulus in supporting demand and the unusual extentto which the recession resulted from a collapse in investment following thebubble of the late 1990s.InvestmentIn an average expansion prior to 1990, total nonresidential investmentstarted to rise at the business cycle trough, but initially rose at a slower pacethan consumption (Chart 2-3). In the expansion of the 1990s, however,investment continued to fall for four quarters after the trough, and in themost recent expansion, investment fell for five quarters after the overalleconomy had bottomed out.Residential investment in the average of prior recessions began to dropeight quarters before the business cycle trough and rose quite sharply in thefour quarters after the trough (Chart 2-4). The housing market has beenstrong in the current expansion, though housing investment has beenincreasing at a more moderate pace than in expansions before 1990. Thispattern is likely the result of the unusual circumstance in which residentialinvestment did not falter along with the broader economy. In turn, this lack52 | Economic Report of the President